Buying property through a limited company

The surcharge applies from day one

An individual escapes the additional property surcharge when they are simply replacing their main home. A company has no main home, so that escape route does not exist. Every residential purchase by a company at £40,000 or more carries the surcharge.

In England and Northern Ireland that means the higher rate bands of 5%, 7%, 10%, 15% and 17%. In Scotland it means the Additional Dwelling Supplement of 8% on the whole price. In Wales it means the higher residential rate table starting at 5%. There is no version of these rules where a company pays less than an individual buying their own home.

The 17% flat rate above £500,000

This is the charge that catches people out. Where a company or other non natural person buys a single dwelling for more than £500,000 in England or Northern Ireland, the rate is a flat 17% on the entire purchase price. Not on the excess, on the whole thing. That rate rose from 15% on 31 October 2024.

On a £900,000 house bought by a company, 17% is £153,000. Under the ordinary higher rates the bill would be around £71,750. The difference is £81,250, which is why establishing whether a relief applies is the first thing to do on any company purchase near or above the £500,000 line.

The reliefs from the flat rate

Several reliefs take a purchase out of the 17% charge and back onto the ordinary higher rates. The most widely used is property rental business relief, which applies where the dwelling is acquired to be let commercially to unconnected parties. A genuine buy to let company purchase normally qualifies.

Other reliefs cover property developers and traders buying in the course of that business, dwellings acquired for the purpose of making them available to the public, farmhouses occupied by a working farmer, and accommodation provided for qualifying employees. Each has conditions and each can be withdrawn if the qualifying use stops within 3 years of the purchase, which brings a clawback of the difference. Buying through a company and then letting a director live in the property is the classic way to lose the relief.

The annual charge that follows

Stamp duty is not the end of it. Where a company holds a UK residential property worth more than £500,000, the Annual Tax on Enveloped Dwellings can apply every year. For the 2026 to 2027 chargeable period the charges run from £4,600 for a property valued between £500,000 and £1 million, to £9,450 up to £2 million, £32,200 up to £5 million, £75,450 up to £10 million, £151,450 up to £20 million and £303,450 above that.

The same categories of relief broadly apply, so a genuine rental business usually pays nothing. The important point is that the relief has to be claimed. A return is still required each year even where the charge is reduced to nil, and the deadline is 30 April within the chargeable period. Companies that simply do not file because they assume no tax is due end up with penalties for a nil return.

Moving existing properties into a company

Landlords often ask about transferring properties they already own into a limited company to improve the income tax position. For stamp duty this is treated as a sale between connected parties, so tax is charged on the market value of the property rather than on whatever price is put on paper, and the surcharge applies in full.

On a portfolio worth £1 million, that can mean a stamp duty cost of well over £100,000 before anything else is considered. Where the properties are genuinely run as a partnership, the partnership provisions can reduce or remove the charge, but HMRC scrutinises these arrangements closely and a partnership has to be real rather than created for the occasion. Capital gains tax on the deemed disposal is a separate issue again, with incorporation relief sometimes available.

The honest position is that incorporating an existing portfolio is often not worth it once stamp duty is counted, and the cases where it works tend to involve larger portfolios genuinely operated as a business. It should never be decided on the income tax saving alone.

Group transfers and reorganisations

Transfers of property between companies in the same group can qualify for group relief, which removes the stamp duty charge entirely. The conditions are strict, requiring at least 75% common ownership, and the relief is clawed back if the transferee leaves the group within 3 years while still holding the property.

Group relief is also denied where the transfer forms part of arrangements involving tax avoidance or where consideration comes from outside the group. Any group reorganisation involving property should be planned before documents are signed rather than explained afterwards.

Non resident companies

A company controlled from outside the United Kingdom faces a further 2% surcharge on English and Northern Irish residential purchases, on top of everything else. Combined with the higher rates or the flat charge, an overseas company can be paying at 19% on a residential purchase. Where the company later becomes United Kingdom resident, a refund of the 2% can sometimes be claimed, so the position should be reviewed rather than accepted.

Commercial property is different

None of this applies to genuine commercial property. A company buying an office, a shop or a warehouse pays the non residential rates of nothing up to £150,000, 2% to £250,000 and 5% above that, with no surcharge and no flat rate. For many owner managed businesses, buying trading premises through a company or a pension scheme remains a straightforward and reasonably taxed step.

Frequently asked questions